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Google hit with record $5 billion fine

The European Union (EU) hit Google with a record $5 billion antitrust fine, accusing the company of illegally using its Android mobile operating system to cement its dominance over other online services.

Margrethe Vestager, the European Commission's competition chief, on Wednesday said that Google's arrangements with phone manufacturers suppressed competition.

"In this way, Google has used Android as a vehicle to cement the dominance of its search engine," Vestager said.

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"These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules."

The decision tops the record previously set by the $2.7 billion fine Vestager leveled on Google last year. That fine was for the company's practice of elevating its own comparison shopping service in search results over rivals' services. The EU also has an open antitrust investigation into Google’s advertising practices.

The fine comes amid trade tensions between the EU and the U.S. after the Trump administration imposed tariffs on steel and aluminum imports from the EU. The EU is retaliating, sparking fears of a global trade war.

The decision also highlights the aggressive approach European regulators are taking when it comes to Silicon Valley. In addition to last year’s massive fine against Google, the EU has also imposed sweeping privacy rules on the industry that require websites to provide increased transparency over their data practices and offer consumers more control over their information.

The European Commission, which is the enforcement wing of the EU, cited Google's practice of forcing manufacturers to install the company's apps on Android phones. Device makers are required to install Google's Search and Chrome apps in order to gain access to the Android app marketplace.

Vestager also accused Google of making illegal payments to manufacturers to ensure that its apps are preloaded on devices.

The decision also cites Google's efforts to prevent any alternative versions of the Android system from being developed and deployed.

Under the terms of the decision, Google will have to cease all three practices and pay the $5 billion fine within 90 days. After that, the company can be fined up to 5 percent of its parent company Alphabet's daily revenue for noncompliance.

Google is already vowing to appeal the fine.

“Android has created more choice for everyone, not less," a Google spokesperson said in a statement on Wednesday. "A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision."

Google CEO Sundar Pichai responded with a blog post in which he argued that Android’s platform is open and promotes competition between developers.

He said that most phones come with dozens of installed apps from a wide variety of companies, and consumers can always download others if they’re unsatisfied.

“We’ve always agreed that with size comes responsibility,” Pichai wrote. “A healthy, thriving Android ecosystem is in everyone’s interest, and we’ve shown we’re willing to make changes. But we are concerned that today’s decision will upset the careful balance that we have struck with Android, and that it sends a troubling signal in favor of proprietary systems over open platforms.”

But the fine is sure to invigorate critics of the internet giant within the U.S. Those critics have long called for regulators here to crack down on what they see as anticompetitive practices and widespread privacy abuses.

In 2012, the U.S. Federal Trade Commission (FTC) closed an investigation into whether Google’s search practices were anticompetitive without imposing any fines on the search company. Some critics in the U.S. are now calling on regulators to revisit that decision in light of the EU’s crackdown and Google’s growth in the years since.

“Once again, the European Commission has found that Google used its dominance to undercut competitors," Sen. Richard Blumenthal (D-Conn.) said in a statement. "The unprecedented fine imposed by Europe sends a clear message that Google and other tech companies cannot continue to abuse international competition law.”

"The FTC should end its decade of inaction and deference, and confront the mounting evidence that Google’s business practices have stifled robust competition in a market that is critical to our economy and society," Blumenthal added. "Europe should not be alone setting the agenda.”

Updated at 11:39 a.m.